Due diligence is important in VAT compliance, including if you want to retain the right of deduction after you have unwittingly taken part in carousel fraud. Recent CJEU case law sets out important guidance on due diligence.

Earlier this year the Court of Justice of the European Union (CJEU) rendered two further judgments on good faith and due diligence. They are of relevance primarily for taxable persons who fell victim of carousel fraud as they provide guidance for tax authorities on how to approach such cases.

The two judgments also offer important lessons for those thinking how to protect themselves against the adverse consequences of inadvertent involvement in fraudulent transactions.

Let’s hope the recent case law will have an impact on the practice of tax authorities which are only too eager to automatically claim lack of good faith and due diligence on the part of taxable persons.

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